Prices of 4G smartphones likely to drop to as low as Rs 3,000 by year-end

Prices of 4G smartphones are likely to drop to as low as Rs 3,000 by the year end, making high-speed broadband accessible to more consumers on their handsets.Gulveen Aulakh | ET Bureau | Updated: April 14, 2016, 13:22 IST

NEW DELHI: Prices of 4G smartphones are likely to drop to as low as Rs 3,000 by the year end, making high-speed broadband accessible to more consumers on their handsets and providing the backdrop for the next battle among India’s biggest telecom operators.

The rapid reduction in handset prices is being accompanied by speedy 4G rollouts by market leader Bharti Airtel, followed by rivals Vodafone India and Idea Cellular, in anticipation of a commercial launch of similar services by Mukesh Ambani-owned Reliance Jio Infocomm.

Little-known Chinese handset player Phicomm, this week, became the first handset maker to offer a 4G smartphone for Rs 3,999, including discounts. And that could be bettered shortly, with Micromax Informatics, India’s No. 2 smartphone brand, saying it will launch entry-level 4G phones over the next few months. “Last year this time, cheapest 4G smartphone was available for $120 (Rs 8,000), within a year it’s down to around $55 (Rs 3,650),” said Tarun Pathak, senior analyst at Counterpoint Research. “Prices can drop to $40 (Rs 2,700) by end of 2016.”

The sharp drop in prices is being driven by two factors. First, the prospects of intense competition among operators is prompting handset makers to drop prices to make the most of anticipated demand.

Second, wider adoption of 4G technology and devices in China, Taiwan, Korea, Japan, and other markets offer massive scale for chip manufacturers to produce components at much lower costs, thereby driving down production costs of the handsets.

Samsung is the market leader in India’s 4G smartphone segment, followed by Lenovo, Xiaomi, Micromax and Apple in that order. In an attempt to build up the handset ecosystem in the lead up to Jio’s 4G launch, Reliance Retail — Jio’s sister company — has also launched 4G smartphones under the LYF brand with one phone being sold for less than Rs 5,000. While the initial thought was to flood the market with 4G phones at under Rs 3,000 levels by subsidising the devices, sources say there appears no need to do that now, given the sharp price drops already being witnessed.

“In September 2015, the most economical 4G smartphone cost about Rs 7,000($105); today we believe there are about 15 smartphones that are available for less than Rs 5,000 ($75),” brokerage Kotak said in a recent report. In 2015, 4G devices sold to end users grew about five times to 27.4 million, over 2014."What we saw happening in 3G, devices will also happen in 4G, but at faster scale," Shubhajit Sen, chief marketing officer at Micromax,. Micromax entry level phones begin from Rs 3,500 for 3G smartphones.

Experts say that most of the 4G phones currently in India support FD-LTE, using the 1800 Mhz band and TD-LTE, on the 2300 MHz band — technologies supported by the likes of Jio and Airtel.

Vodafone and Idea offer 4G services only on the FD-LTE band. But only a few of the 4G devices in the market currently support FDLTE using the 850 MHz band which will be used by Reliance Communications and also by Jio to offer 4G.

Going forward, more phones are expected to support the 850 Mhz band as well.

Several people ET spoke with about Ericsson’s India operations, including its current and former employees, said the Stockholm-based firm has reduced headcount in the last one year or so across functions, in line with its global restructuring.